Mercedes-Benz and Infiniti confirm Mexican small car production from 2017

Mercedes-Benz parent company Daimler AG and the Renault-Nissan Alliance have confirmed reports that they will embark on a joint-venture to build next-generation Mercedes and Infiniti premium small cars in Mexico from 2017.

The deal greatly expands the wide-ranging and cost-saving collaboration between the German and French-Japanese companies, which commenced in 2010 and saw each buy a single-digit stake in the other through equity exchange.

Construction of the one billion euro ($1.45b) plant in Aguascalientes next to an existing $2.1b Nissan plant will commence in 2015, with development costs to be divided equally between the two parties.

Having the plant in Mexico will allow both companies to cut production costs and attain more immediate access to the US market. Cutting production expenses on relatively low-margin compact cars, compared with more lucrative larger models, is especially vital for both automakers.

It will also be especially important for Infiniti as it chases an ambitious target of capturing around 10 per cent of the global premium vehicle market by 2020. The Mexico plant will allow the company to divert more of its Japanese and UK production from the US to world markets such as Australia.

Production will commence in 2017 for Infiniti, followed by the production of small Mercedes-Benz vehicles in 2018. By the time the plant is running at capacity in 2021, around 300,000 vehicles will roll off the line annually.

Both sets of vehicles will be based on Mercedes-Benz’s Modular Front Architecture (MFA), the first generation of which underpins the current A-Class, B-Class, CLA and GLA. By sharing its technology with Nissan-Renault, Daimler can amortise the MFA’s development costs more quickly.

The first vehicles to roll off the line will be the Infiniti Q30 and its QX30 crossover derivation, with a coupe version also believed to be in contention.

The Mexico site will not be the sole production site, with Nissan’s Sunderland plant in the UK also confirmed as a source. Infiniti Australia will more than likely source its cars from here.

The 2018 timeline for Mercedes-Benz indicates it will be the next-generation of MFA cars that will be produced in Mexico. The first of the current crop of MFA vehicles to enter production was the B-Class, back in 2011.

Both companies insist the two sets of MFA-based vehicles will sport very different designs.

Whether this means Australia will see Mexican-made Mercedes-Benz and Infiniti small cars and crossovers later in the decade is unclear, though both Infiniti Australia and its Mercedes-Benz counterpart here have indicated so long as the cars meet production standards and shipping timelines — and are made in right-hand-drive — it would not be out of the question.

Mercedes-Benz currently makes its MFA vehicles in Germany, Hungary and Finland.

Speaking at the announcement, Renault-Nissan Alliance chairman and CEO Carlos Ghosn said expanding Infiniti’s range and production was vital, and teaming up with Daimler AG would make this expansion possible in a faster and cheaper fashion.

“Infiniti’s goal is to capture 10 percent as a first step, as a first milestone, of the global premium vehicle market. To do so we need to expand our range of models, including the growing compact premium segment to appeal to customers in all of our core markets,” said Ghosn.

“By partnering with Daimler on development and production costs, Infiniti will move faster and will achieve greater economies of scale.”

Ghosn’s counterpart at Daimler AG, CEO Dieter Zetsche, said: “In Aguascalientes, we will take our successful partnership to the next level by combining the skills of our two companies Daimler and Nissan in one production plant. Just over four years after the cooperation was founded, the decision for the new plant in Mexico is a major milestone.”

The news signals an expansion of an already significant alliance between the Franco-Japanese and German pair, which have collaborated on the next-generation Smart car and Renault Twingo and — with Ford — development of mass-market hydrogen-powered cars due around 2018.